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Assessing Risk for Insurance Funded by Zero Coupons with Stochastic Interest Rates

time of an individual aged x. la~ = hazard function or force of mortality for an individual aged x. ... tP, = probability an individual aged x survives to x+t. gx(t) = density function of T,. = ~p~ lax÷ ...
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Description: The investment risk generated by a stochastic interest rate is recognized as often the greatest risk associated with a whole life or retirement policy. Recent research has investigated the mathematics of this risk when the interest rate follows a stochastic process and the time to death is considered to be random. In this paper we focus on the use of the zero coupon bond as an investment instrument to fund a whole life policy. It is unlikely that a company will entirely fund a particular single policy with a zero coupon bond.
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- Authors: H Tolley, HENRY CONRAD WURTS
- Date: Jan 1996
- Competency: External Forces & Industry Knowledge>Actuarial theory in business context; Strategic Insight and Integration>Strategy development
- Publication Name: Actuarial Research Clearing House
- Topics: Finance & Investments>Investment strategy - Finance & Investments; Finance & Investments>Risk measurement - Finance & Investments

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